2017 (7) TMI 241 - HC - Central Excise

Penalty u/s 11AC - CENVAT credit was taken, which was not permissible and after the same was realized in audit, thereafter it was reversed - Held that - if before utilization, the entry has been reversed it amounts to not taking credit - reliance placed in the case of Steelco Gujarat Ltd. v/s. Union of India 2012 (8) TMI 175 - BOMBAY HIGH COURT wherein the Court observed that if the credit taken on inputs used in the manufacture of the goods cleared under N/N. 14/2002 C.E. or N/N. 30/2004 C.E. is reversed before utilization, it would amount to credit not having been taken - penalty set aside - appeal dismissed - decided against Revenue.

Summary

Issues:
1. Appeal against CESTAT judgment quashing penalty under Section 11AC of Central Excise Act, 1944.

Analysis:
1. The Department appealed against the CESTAT judgment where the Assessee's appeal was partly allowed, and the penalty under Section 11AC was quashed. The Appellant argued that the Assessee consciously evaded duty by taking impermissible cenvat credit, which was later reversed upon audit realization. The Appellant cited the Apex Court's judgment in Union of India v. Rajasthan Spinning and Weaving Mills, emphasizing the Assessee's liability for penalty under Section 11AC.

2. In response, the Assessee's counsel contended that the mistake was rectified before utilizing the credit, with no benefit derived, and no intent to evade duty. Referring to the Apex Court's judgment in Commissioner of Central Excise MumbaiI v. Bombay Dyeing and Manufacturing Co. Ltd. and a Division Bench judgment in Steelco Gujarat Ltd. v. Union of India, the Assessee argued that Section 11AC penalties were not applicable in this scenario.

3. The Court considered the arguments, precedents, and submissions from both sides. It noted that the Assessee rectified the mistake by paying duty through credit reversal before any show cause notice. The Court referenced the Union of India v. Rajasthan Spinning and Weaving Mills case, highlighting that Section 11AC penalties are for deliberate deception to evade duty, which did not apply in this case. The Court also mentioned the similarities with the Bombay Dyeing and Manufacturing Co. Ltd. case and the Steelco Gujarat Ltd. case, where credit reversal before utilization was deemed as not taking credit.

4. Based on the precedents and judgments cited, the Court concluded that the Tribunal's decision was reasonable, no substantial legal questions arose, and thus, the appeal was dismissed without costs.